A U.S. Federal Communications Commission plan to redirect telephone subsidies to rural areas to broadband deployment could leave out cable-based voice and broadband providers, a cable trade group said Tuesday.

The FCC's plan, expected to be considered by commissioners later this month, appears to give incumbent telecom carriers the right to hang on to Universal Service Fund (USF) contracts in rural areas, the American Cable Association said.

"We strongly object to the commission's plan to provide [incumbent] carriers with the opportunity to enter into what is a sole-source worth billions of dollars annually over multiple years,"said Matthew Polka, ACA's president and CEO. The plan "will not drive high-performance broadband efficiently and effectively to unserved and high-cost areas."

The FCC plan, announced by agency Chairman Julius Genachowski on Thursday, appears to mirror a plan by AT&T, Verizon and some telecom trade groups, in allowing incumbent telecom carriers this so-called right of first refusal as long as they cover 35 percent of an area with broadband, said the ACA, which represents small and medium-sized cable operators.

Genachowski's remarks last week appeared to endorse the telecoms' proposal to allow incumbent carriers to continue to serve an area for up to 10 years without competitive bidding, Polka said.

The incumbent telecom carriers would have a right of first refusal on US$1.8 billion worth of subsidies a year, ACA officials said.

Genachowski did not lay out many details when announcing his proposal last week, but ACA officials said his speech seemed to indicate he favors a right of first refusal.

ACA officials called on the FCC to allow incumbent operators to get a right of first refusal only in cases were broadband coverage is under 35 percent.

A spokeswoman for America's Broadband Connectivity Plan, the proposal by Verizon, AT&T and other telecoms, declined to comment on ACA's concerns. "I can't comment on cable's concerns, especially since it is the FCC that will be making the decisions on a USF reform order," she said.

Cable providers want a chance to expand broadband service in rural areas, said Craig Martin, general counsel at WideOpenWest (WOW), a Denver-based cable provider offering service in parts of the Midwest. "We want to compete, we're compared to compete as operators," he said.

Grant Gross covers technology and telecom policy in the U.S. government for The IDG News Service. Follow Grant on Twitter at GrantGross. Grant's e-mail address is grant_gross@idg.com.

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